France's BPCE takes 7% stake in Sabadell, bolstering Spanish bank's defences

By Jesús Aguado

MADRID, Oct 6 (Reuters) - France's BPCE has bought a 7% stake in Spanish lender Sabadell and plans to be a long-term shareholder, in a move analysts said could help shield Sabadell from potential hostile bids after it fended off bigger rival BBVA last year.

The deal comes as European banking consolidation gathers pace, with Italy's UniCredit moving closer to taking control of Germany's Commerzbank.

BPCE and Sabadell said on Tuesday they would explore opportunities for cooperation, particularly in corporate and investment banking and consumer credit.

The two banks expect to conclude discussions in early 2027. They said any agreement would support Sabadell's growth in Spain while strengthening BPCE's presence in Europe.

BPCE last year bought Portugal's Novo Banco for €6.4 billion ($7.4 billion).

The banks did not disclose the value of the stake. At current market prices, a 7% holding in Sabadell is worth about €1.2 billion.

At 0825 GMT, Sabadell shares were up 2.3%, outperforming Spain's blue-chip index, which was up 1.2%.

SABADELL'S STANDALONE STRATEGY

Sabadell, Spain's fourth-largest bank by market value, is pursuing a standalone strategy following the sale of British unit TSB.

Analysts said the BPCE investment could form part of a defensive strategy after Sabadell entered last year's hostile takeover battle with BBVA without significant core institutional shareholders, apart from insurer Zurich.

"Obviously, this move removes possible situations such as the one experienced with BBVA. And the market will, in the long term, come to understand that the natural move would be a merger between the two, although this could take place only in the very long term," said Nuria Alvarez, an analyst at Madrid-based brokerage Renta 4.

Sabadell said BPCE's stakebuilding had been agreed with the bank and carried out in a "friendly manner, with full transparency and clarity". It added that the deal does not envisage Sabadell taking a stake in the unlisted French lender.

BPCE plans to seek representation on Sabadell's board and does not intend to increase its holding above 9.9%, according to a joint statement. Sabadell said the agreement does not envisage BPCE appointing a second board member.

Citi analysts said "the arrival of a friendly strategic shareholder with board representation ambitions could nonetheless strengthen Sabadell's position in any future consolidation discussions."

BPCE will begin talks with Spanish and European regulators on appointing a board representative, subject to the necessary approvals.

($1 = 0.8917 euros)

(Reporting by Jesús Aguado. Editing by David Latona and Mark Potter)